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can I sell my rental with existing tenants

Can I Sell My Rental with Existing Tenants?

By Blog

The short answer is yes! You can sell your property if you currently have existing tenants. However, selling a home with active tenants is more complicated than selling an empty home. Here, we’ll cover things you should consider prior to listing your rental property for sale, and the proper steps that must be followed to ensure a smooth transition.

Be transparent with buyers.

In almost all cases, tenants are allowed to complete the terms of their lease, even if the home is sold. The one exception to this is if your lease contains a lease termination clause on sale or transfer of ownership (which means the tenant’s lease ends when the property is sold). If your lease doesn’t have this verbiage, the tenants are permitted to continue living in the home until the lease expires, regardless of if the home is sold to someone new. Upon the lease end date, the new owner will choose whether they will renew the lease, depending on what they intend for the property. The new owner is responsible for returning security deposits to the tenant.

It is your duty as the seller to inform the buyer of the active lease. Consider sending them the lease agreement so they have a full understanding of the terms they will be required to honor. This can protect you from late-stage sale terminations should the buyer discover that they can’t meet the terms of the lease agreement.

Some rentals will be a harder sell than others.

This is one of the biggest factors in selling a home with a tenant. Some situations and terms of the lease are simply not as appealing as others. Here’s what you should consider prior to selling your rental:

  • Tenant and the state of tenancy – are the tenants cooperative, up to date on payments, and properly caring for the property?
  • Is the location in a primarily rental area, such as a college town?
  • Market value of the home – if it’s a high value property, it’s unlikely that a typical family will want to take on the mortgage and have to wait to move in.
  • Lease length – how long until the end of the lease? If it’s only a few months, that may work for buyers looking to move in within a certain timeframe. If you still have two years left, investors may be the only buyers interested.

One more important thing to consider is the condition of the rental. If it needs significant updating or renovating, it is unlikely that you will be able to complete this unless you have flexible tenants. You may be able to offer them accommodations elsewhere while you complete repairs, but most people will not be receptive to having their lives disrupted in this way. In reality, if your tenants are a family with kids in school, a complete kitchen renovation probably isn’t an option. Keep this in mind when deciding if you want to sell now or wait for the lease to expire.

Never force tenants to leave.

Even if you currently have nightmare tenants, you cannot use the sale of the home to force them out unless you have a specific clause within the lease. This will constitute an illegal eviction and can land you in serious trouble both legally and financially.

Keeping interactions with your tenants polite and friendly is the best thing you can do to ensure a smooth sale. Be considerate when scheduling showings or repairs. In short, make this transition as easy as possible for them. If you think the rental could use it, offer to hire a cleaner or landscaper to come to the home. When you coordinate showings, adhere to the terms of your lease. If it states you must give 48 hours of notice to enter, that’s the amount of notice you are obligated to give for showing the home to interested buyers. You might give them even more time out of courtesy. Happy tenants are far more likely to be cooperative.

An option for legally moving tenants out of a rental is offering them cash for keys. However, it’s important to note that this option can be risky. Should you advertise the property as “vacant upon closing” and the tenant ignores the agreed upon move out date, you can be held liable to damages incurred to the new owner.

Selling a home with existing tenants restricts the buying pool.

Buyers who need to move in right away will not be interested in a home with existing tenants. However, investors interested in rental properties will be – particularly if you have model tenants. Buyers who don’t want to move right now but want to jump into the housing market before the prices continue to rise may also be more flexible and willing to purchase a property with an existing lease.

Selling a home with existing tenants doesn’t always have to be viewed as a negative. Other landlords and investors will look at existing tenants as a benefit. If the lease doesn’t expire for some time, marketing the property as an investment can make it stand out to the buyers who will be interested.

Investigate local restrictions.

Currently, one of the biggest changes for landlords has been related to COVID-19. Some cities have imposed eviction moratoriums, so if your tenants are behaving in a way that may usually warrant an eviction (such as consistently not paying rent), there may be restrictions that limit the actions you are allowed to take. If your property is in a rent-controlled area, look up the applicable laws to make sure the new buyers are allowed to end the rental agreement.

Always keep yourself on the right side of the law, as the consequences can be devastating.

Selling a home with existing tenants is possible, but it’s best to be realistic.

The ease of selling a rental property is entirely fact specific. If you have great tenants and the property is in good shape, you have far more options than if you need to renovate or repair. Keep your mind open to other possibilities, such as selling to investors or new landlords, and understand that this might not be the typical sale of a home.

Fixing Up a Home vs. Selling as Is

Fixing Up a Home vs. Selling as Is

By Blog

The housing market in the Treasure Valley is still hot, and homeowners hoping to sell their home are evaluating all the possible options to cash out on some of the equity they’ve gained over the last few years. When you’ve lived in a home for a long time, however, some maintenance tends to fall to the wayside. Because of this, many homeowners are wondering – should I fix up my home or sell it as-is?

The housing market can be tricky. Pouring money into the wrong project can easily waste your time and money without returning anything for your trouble. Before you decide to jump into home improvement, consider if the plan you have in mind will be worth it in the end.

What does selling a house “as is” mean?

When a seller lists a house as is, it usually means that they will not make any repairs to the property prior to the sale. They will not make any concessions on price for necessary repairs, meaning the purchaser will buy the house in its current condition for the full list price. The buyer then makes all repairs after the sale of the home closes.

What do other homes in your area look like?

The first step in deciding what repairs, if any, you should make to your house involves evaluating the market in your area. If homes are flying off the market, you could fix up your home to raise the list price, expanding your profit. On the other hand, selling as is may mean that your home sells quickly, getting you your equity faster than if you spend time making repairs. Keep in mind that hot markets are never guaranteed, and if the market slows down by the time you’re done renovating your property, you could miss out on the benefits of a seller’s market.

Next, tour some homes that are for sale or pending in your area that are around your preferred sales price. What does that home have that yours does not? What updates did those sellers do? Which homes generate a lot of interest, and which ones have been sitting for some time? This will give you some insight into what buyers in your area are expecting to find in a potential home.

Finding the balance between profitable repairs and an attainable sales price is key when deciding if you should fix up your home or sell it as is. If you decide to fix up, avoid updating the property beyond the other homes for sale in your area. Your house may look beautiful and upgraded, but you could end up pricing out the typical buyer looking in your community – plus you’ll be competing with other houses at a better price point.

What improvements will give the highest return?

There are a few repairs and renovations that typically provide the highest profit return. Some of them are big renovations, while others are easier to complete on your own.

Here are a few specific big-ticket renovations that have the highest chance to increase your profit, but may not be easy to DIY:

  • Replacing windows
  • Replacing or painting siding
  • Kitchen repairs and updates
  • Bathroom repairs and updates
  • Newer carpets
  • Hard surface flooring in the bathrooms

When completing big repairs and renovations like this, you must keep profit in mind. When fixing up a home, it is easy to sink a lot of money into upgrades that won’t be reflected in the purchase price.

To put this into perspective, the average cost of replacing carpets in Boise ID is about $4,000. If you replace the carpets, you’ll have to increase your home’s sale price by at least $4,000 to cover costs and ensure a profit. If your carpet is only a few years old and in pretty good shape, your purchase price most likely wouldn’t support a $4,000 increase and you could lose profit by replacing them. However, if your carpet is extremely dated green shag, including in the bathrooms, it’s probably worth it to spend the money to have them replaced.

If big repairs and renovations aren’t a possibility, here are some DIY fixes that can increase your profit and appeal to buyers:

  • Patching holes and cracks in walls and ceiling
  • Deep cleaning carpets
  • Replacing outdated fixtures
  • Fixing leaky faucets
  • Adding a new coat of paint to the interior walls, particularly if they are a dark color
  • Sprucing up your curb appeal by cutting back overgrown greenery or mowing and treating the lawn

Keep in mind that some necessary repairs won’t add a lot of value to your home. Major repairs outweigh cosmetic updates, and this must factor into your decision to fix up or sell as is. If your roof is in bad shape or your HVAC system doesn’t function properly, buyers may be scared away by the prospect of making repairs after the sale, even if they adore the kitchen. If your home needs a major repair like this and you only have the time and budget for so many projects, selling as is may be the more profitable option.

When is it best to sell as is?

There are two main categories of reasons why a home may need to be sold as is. The first relates to your personal circumstances:

  • You need to move quickly for a job or change in lifestyle
  • You’re facing a foreclosure
  • There is a lien on your property that must be paid off
  • You don’t have the budget or time for repairs

If you need to sell your property quickly, selling as is could be the best option. You can avoid long repair timelines, and cash out on your equity sooner than if you spend months fixing up your house.

If your house needs a lot of work, it may also be more profitable to sell as is. For example:

  • The home has been smoked in for a lot of years and will require professional help
  • The home needs repairs that you can’t DIY, such as complex electrical work or plumbing
  • The home needs foundation repairs, or significant structural repairs

Large repairs like these come with high price tags and long timeframes. By the time the house is fixed up to the level of other homes in your area, you may have missed the window of opportunity to cash out on your hot market. In cases like these, it’s easy to spend months fixing up your home, only for the sales price to end up not covering the costs of repairs.

Explore all of your options before diving into a project.

If you’re thinking about fixing up your house, fast, low-cost updates are often preferable to huge renovations. If repairs are relatively straightforward, fixing up your house can yield a good profit. If you don’t have the time or finances to spend on updates and repairs, selling your home as is may be the best option. Prior to diving into repairs and updates, do some research on the homes in your area and what projects will be profitable. You may find that you can get more from doing less.

How to Sell a House - Traditional, FSBO, Investor

How to Sell a House – Traditional, FSBO, Investor

By Blog

Selling a property can be a complex process. Many owners don’t know the various options they have when it comes to advertising and selling their house. When deciding the best way to move forward, sellers should carefully consider all their options. There are three main methods of selling a property, and each have their pros and cons.

Traditional Real Estate Market

The traditional method is what most will immediately think of when it comes to selling a house. The traditional method of selling a property includes the seller finding a real estate agent to represent their interests, selling the home on their behalf.

Here is a brief list of what realtors do for a seller:

  • Appraise the property and determine a property value that will generate interest
  • List the property on the Multiple Listing Service (MLS)
  • Network with other agents to try to find potential buyers
  • Draw up paperwork and negotiate the terms of the contract
  • Set up closing with the preferred title company

Hiring a realtor allows sellers to take a hands-off approach. The realtor primarily handles all communication with potential buyers. In return, the seller pays their agent a commission ranging from 3-6% depending on the terms of the contract. Commissions and fees are usually taken out of the total sales price, so while these fees aren’t necessarily out-of-pocket, they shave down the seller’s overall profit, sometimes by tens of thousands of dollars.

Sellers must be prepared for staging areas of the house as well as leaving the property for open houses and showings. If the house needs repairs, a seller may need to offer concessions. These can come in the form of the seller making repairs prior to closing or taking the cost directly off the top of the sales price. In the end, the costs of selling a property through the traditional market can quickly add up. 

This method works best for sellers who are too busy to invest too much time into the sale of their property and have wiggle room in how much profit they expect. If a seller has time to wait for the perfect buyer, the traditional market can be a good option.

For Sale By Owner (FSBO)

If a seller wishes to avoid commissions or working with a realtor, they may consider advertising the home as a For Sale By Owner (FSBO). In an FSBO situation, the owner takes over all of the duties that would otherwise be handled by an agent. This allows for complete control over the advertising and sale of the property, potentially saving thousands of dollars.

A word of caution for this method, however. Without representation by a brokerage, the seller is legally responsible for the sale. In other words, should a seller not provide the correct paperwork such as property disclosures, there could be financial and legal ramifications.

Overall, this method of sale is best for those who have experience in real estate and are prepared to navigate the paperwork involved in selling a house.

Selling to an Investor

Technically, a house can sell to an investor through the traditional market or by a FSBO listing. An investor could come across the listing and make an offer. However, a unique aspect of selling to an investor is that the seller can take an active role in seeking one out. Instead of taking a hands-off approach and waiting for buyers to take interest, a seller can reach out to investors in the area.

Typically, investors don’t require staging or repairs, saving the seller money. These sales avoid open houses and show times. The timelines for investor sales also tend to be shorter, as there aren’t as many moving parts as traditional sales. In most cases, a seller controls the timelines of the sale with this method.

When seeking out investors, sellers should be wary of out-of-state companies. Unfortunately, large out-of-state investors can tie up the sale of the property, over promising and under delivering. A seller must be careful to vet any investors they find, and local investors tend to have much more flexibility and, ultimately, shorter timelines.

If you’re looking to sell your house quickly and without having to make repairs, updates or pay any fees or closing costs, we buy houses for cash in Boise and the entire Treasure Valley area. Give us a call today or fill out the form on our homepage to get an offer for your house today.

Rent Back Agreements - Home Buyers in Boise

What Is a Rent-Back Agreement?

By Blog

Also known as a Seller’s Post-Settlement Occupancy or post-closing occupancy, a rent-back agreement is an arrangement in which the buyer of a sold home leases the space back to the seller for a certain amount of time immediately after closing. The terms of a rent-back agreement must be included in the contract for the sale of the property, although different states have varying real estate rules and required paperwork. For example, in some states such as Idaho an addendum to the contract must be written up that outlines the terms of the rent-back agreement. In other states, there is a standard form included with the contract that outlines the terms of the agreement. Any rent-back agreement paperwork must specify rent, security deposits, and deadlines. No matter how the terms are drawn up, the rent-back agreement essentially functions as a short-term lease.

The terms of a rent-back agreement are negotiable and entirely up to the buyer and seller. For the most part, buyers base their rent on fair market prices. Sometimes, but not always, a refundable security deposit is required, as well as a final walk-through prior to closing. Should a security deposit be required, damages incurred after closing are normally taken out of that security deposit and the rest refunded to the seller after the end of the rent-back agreement. The time frame is up to the buyer and seller, covering anything from a few short weeks to a few months after closing.

Why would a seller want a rent-back agreement?

In real-estate, particularly in hot markets, sometimes circumstances arise in which your current home has been sold but you don’t have your next residency lined up. Perhaps you’d like to cash out your current equity but aren’t ready to leave the house yet. Rent-back agreements are an excellent way for sellers to get around time-crunches while still receiving funds from the sale of their property. A seller may consider requesting a rent-back agreement if any of the following applies to them.

  • The seller needs the sale proceeds to apply towards the purchase of their next home, avoid a foreclosure, or officially settle a divorce.
  • The seller would like to cash out on the equity of the home at the height of the market but aren’t ready to move from the house yet.
  • The seller has children in the middle of a school year and would prefer to allow them to finish out the year in the same school district.
  • The seller wants to avoid moving twice, first to a hotel and then to their new home. Moving twice becomes very costly and can be an inconvenience.

In most of these situations, a rent-back agreement might be a great option for the seller to ensure they get their money as quickly as they need it. Many sellers who are strapped for time aren’t aware that rent-back agreements are even an option.

Why would a buyer want a rent-back agreement?

In reality, it may be difficult for sellers to find buyers willing to accept a rent-back agreement. Even though the market in most areas of the country, particularly in Boise and the Treasure Valley, is currently highly seller-friendly due to a shortage of homes, rent-back agreements come with risks that most buyers just aren’t willing to take. For example, if the seller doesn’t adhere to the guidelines of the agreement, the buyer could find themselves unable to move into their new house until the seller has been formally evicted.

Plus, as with all rental properties, there is the potential risk of damage to the property after closing. The seller is usually required to put down a security deposit to cover any damages that occur after the final walk-through and closing of the home. Even so, many buyers in the traditional real estate market are risk averse and avoid extra complications as much as possible when buying a home.

Although a buyer requesting a rent-back agreement may be more of a rare occurrence, there are a few examples of when it may benefit a buyer.

  • The buyer must close the sale by a specific date but is flexible on their own move-in date.
  • The lender has locked their rate and rate-lock extensions are expensive.
  • This will be a buyer’s rental property, and they need to avoid tax penalties.

In these and other situations, a buyer may choose to close on time and rent the property back to the seller.

We always offer rent-back agreements to our sellers.

Willingness and ability to offer rent-back agreements is one of the major differences between selling your house to a traditional buyer vs. an investor who buys your house for cash. Cash home buyers usually don’t have rigid timelines or deadlines that they must meet, and don’t intend to move into the houses themselves. This allows far more flexibility for sellers to get their money without stressing about closing dates and immediately moving out of the property.

As cash home buyers in the Treasure Valley, we’ve seen many situations where sellers feel backed into a corner. They are on a tight timeframe and absolutely must sell their property faster than they’re able to move out of it. Unfortunately, there aren’t a lot of options for sellers in this position.  If you’ve found yourself in this situation, you can trust that we will be able to work with you and offer a rent-back agreement until you’re ready to take your next steps.

(208) 866-7020